BIS study shows higher bank deposit rates slow stablecoin growth

A new Bank for International Settlements study shows that modest increases in bank deposit rates could meaningfully slow stablecoin adoption, a finding that reinforces how closely digital assets compete with traditional banking for retail savings. The research suggests banks retain pricing power over the stablecoin market, though the effect weakens if yield-bearing stablecoins and other alternatives gain traction.

• A one basis point rise in bank deposit rates cut ten-week stablecoin growth from 15% to 12%, per BIS analysis of January 2019 to June 2025 data.
• USDC showed stronger rate sensitivity than USDT, researchers attributed this to Circle’s product’s tighter integration with U.S. user deposits.
• Federal Reserve analysis shows stablecoin reserve allocation determines whether adoption displaces bank deposits or simply restructures funding composition.

• 1 bps Bank deposit rate increase predicting slower stablecoin growth in ten-week periods.
• 15% to 12% Stablecoin market capitalization growth decline from one basis point deposit rate rise.
• $6 trillion Bank of America CEO estimate of deposits that could shift to stablecoins and yield products.

CoinDesk reported that a working paper published by the Bank for International Settlements found banks could moderate stablecoin adoption by offering higher deposit rates to savers. Researchers Rashad Ahmed and Iñaki Aldasoro examined weekly data spanning January 2019 to June 2025, controlling for bitcoin prices, Treasury yields and broader financial conditions. They discovered that a single basis point rise in average U.S. bank deposit rates predicted a reduction in ten-week stablecoin market capitalization growth from approximately 15% to approximately 12%. Even under the authors’ preferred estimate, which adjusts for banks raising rates in response to stablecoin growth itself, the slowdown was substantial, declining to roughly 6%, though the researchers noted some methodological limitations with that approach. In both scenarios, stablecoin adoption continued but at a measurably slower pace.

USDC faces stronger rate competition than USDT

The BIS paper found that deposit rate increases had a more pronounced effect on Circle’s USDC than on Tether’s USDT, a divergence the authors attributed to USDC’s closer integration with U.S. depositors. This pattern suggests that stablecoins marketed primarily to domestic retail users respond more elastically to changes in bank deposit yields than those serving a more globally dispersed or institutional user base. The finding aligns with bank industry concerns about deposit flight to higher-yielding alternatives among price-sensitive customers.

Bank of America Chief Executive Officer Brian Moynihan warned in January that as much as $6 trillion in deposits could migrate into stablecoins and related yield-bearing products, potentially reducing lending capacity and raising borrowing costs for businesses and consumers. The BIS analysis provides empirical support for that concern, quantifying how sensitive stablecoin demand can be to yield differentials between traditional banking and digital alternatives.

How stablecoin reserves reshape rather than reduce bank deposits

A December Federal Reserve staff analysis explained that the relationship between stablecoin adoption and bank deposits depends critically on where stablecoin issuers park their reserve assets. When issuers hold reserves as bank deposits, overall banking system size may remain stable but funding composition shifts toward larger, uninsured wholesale deposits and away from insured retail deposits. According to Federal Reserve analysis, this restructuring increases banks’ liquidity risk and funding costs even when total deposits do not decline. Conversely, if issuers allocate reserves to Treasury bills, repurchase agreements or money market funds instead, bank deposits face direct outflow pressure.

Reserve allocation practices vary widely among major stablecoin issuers. The Federal Reserve noted that issuers’ reserve strategies may shift in response to evolving compliance requirements.

The Federal Reserve analysis leaves open a material question: whether stablecoin issuers with no direct access to Federal Reserve master accounts will maintain their current reserve allocation once regulatory frameworks stabilize, and whether that allocation choice will cluster around lower-cost treasury alternatives or remain distributed across bank deposits and other assets.

The BlockWest read. The BIS study confirms banks can compete on price, but only at the cost of narrower margins. The Federal Reserve’s deeper finding is structural: stablecoin adoption need not shrink total bank deposits if issuers hold reserves in banks, but it will push that funding up the liability stack toward uninsured wholesale deposits. Banks face a choice between paying more to defend retail deposits or accepting higher liquidity costs and funding concentration from issuer deposits. Neither path improves bank economics.

The findings rest on data through June 2025 and may not hold as yield-bearing stablecoins and tokenized money market funds gain market share, according to the BIS authors.

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